Phony Agents Prey on Homeowners
Aaron Glantz | 7/9/2010, 11:41 a.m.
In Oakland's Laurel District, struggling homeowner Giselle Jiles got a letter in the mail that appeared to be from her lender, JP Morgan Chase.
Jiles has been out of work since March 2009, and since last October, she has been trying to get Chase to modify her mortgage so she can stay in her home. But for nine months, her applications for forbearance have gone into a bureaucratic black hole.
As her savings dwindled, Jiles, 52, has gotten increasingly desperate. So she was understandably excited when she read the letter's subject line: Payment Reduction Notice Regarding Your Loan.
"I thought, 'Finally, I'm getting somewhere,'" she said. "But then I looked at the letter more closely."
In barely legible type, below legal disclaimers, Jiles spotted the real source of the letter: "Priority Realty Group.... not an affiliate of, nor endorsed by, nor associated with" Chase or any government organization.
Jiles didn't fall for their pitch, but others might. Priority Realty is one of hundreds of for-profit companies that seek to benefit from the pain of homeowners hit hard by the recession.
"I've never seen anything like it in terms of sheer volume," said Tom Pool, spokesperson for the California Department of Real Estate. "People see the opportunity to take advantage of these homeowners, and they're doing it."
Pool said his agency has initiated over 600 enforcement actions against shady brokers, but admits that it can be difficult to catch mortgage fraudsters, who invent a new scam every time lawmakers make the old one illegal.
This is the case with Priority Financial. When Jiles called them, a representative of the company said they would handle her loan modification request if she paid them the equivalent of one mortgage payment.
To get around a new state law banning mortgage modification firms from charging for services in advance, a company representative said they would charge her "as services are rendered, every step of the way," from a fee for receiving her loan information to a fee for faxing that information over to Chase.
"If I can't afford to pay my mortgage payment, how can I afford to pay that?" Jiles asked Brian Gorman, a real estate agent at Priority Financial.
"If you can't afford the payment and you're struggling," Gorman responded, "the odds of you getting help by going to Chase are slim to none."
"We guarantee our results 100 percent," he added, "and we have a 97 percent success rate."
Priority Realty has an F rating from the Better Business Bureau, and BBB's website is full of complaints from homeowners who say they were swindled by the Southern California company. One of them, California National Guardsman Erik Kallstrom, said he paid Priority $1,632, persuaded by their 100 percent money back guarantee.
But when the company failed to renegotiate his mortgage, it refunded only $25, saying the balance had been absorbed by "earned fees."
In the meantime, "the house is now in foreclosure, and time has run out," he said.
Evan Westrup, a spokesperson for Attorney General Jerry Brown's office, said Priority Realty has failed to register with his office or to post a $100,000 bond as required by state law. In the last two years, Brown has sought court orders to shut down more than 30 fraudulent foreclosure relief companies and has brought criminal charges and obtained lengthy prison sentences for dozens of other deceptive loan modification consultants.
But Westrup admits that represents a small fraction of mortgage fraud being perpetrated.
"The loan modification industry is filled with con artists and swindlers who rip off desperate homeowners," he said. "Ultimately, consumers have to be able to spot a scam themselves."
Chase spokesperson Tom Kelly said the bank's legal department sent a strongly worded letter to the company, which "demanded that Priority Financial Group and its affiliates omit all references to Chase, Washington Mutual Bank, and any affiliates from its solicitations."
"The marketing campaign clearly creates a likelihood of confusion among Chase's borrowers," Kelly said.
Despite the letters from Chase and law enforcement, Priority Financial has continued to operate, but under a new name.
David Gomez, who was listed with the Department of Real Estate as the company's broker, said he is now the "branch manager" at the Freedom Law Center, which he said operates under a license from the State Bar.
As such, he said, there was no need for his firm to register with the attorney general's office or to pay a bond, adding that his company never poses as a bank.
"The first thing we tell all our clients is: We are not Chase," he said, pointing to the legal disclosure at the bottom of their solicitation. "How can we be Chase if we are helping them modify their mortgage with Chase?"
With up-front fees banned, the Department of Real Estate's Pool said more and more scam artists are using the same tactic as Priority Financial. It's called a "forensic loan audit," in which real estate agents take money for reviewing homeowners' documents, a service that many government-funded non-profits are willing to do for free.
Scammers are able to prosper in part because the banks have been so reluctant to modify people's mortgages, despite receiving billions of dollars of taxpayer subsidies.
Nationally, the Treasury Department reports, banks have permanently modified fewer than 300,000 of 3.2 million mortgages eligible for refinance under the Obama administration's Making Home Affordable Program (HAMP).
Jiles bank, JP Mortgage Chase, has been allotted $4.9 billion to help troubled borrowers refinance, but has permanently modified fewer than 40,000 of 246,000 eligible mortgages.
"Priority Financial was very persistent," Jiles said. "They called me twice after their mailing came, and the agent even gave me a cell phone number. I've been calling and faxing Chase every week for months and almost never get a response."